Jubilee Corp. purchased a new van for food deliveries on January 1, 2016. The van cost $75,000 with an estimated life of 5 years and $8,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used. What is the balance of the Accumulated Depreciation account at the end of 2017?

The answer is $48,000

Explanation:

To determine the percentage rate to be used: 100percent /5 years

=20percent.

So doubling 20percent equals 40percent(This is the rate to be used).

Depreciation for Year 2016:

0.4 x $75,000

=$30,000

New Net book value = $75,000 - $30,000

= $45,0000

Depreciation for Year 2017:

0.4 x $45,000

=$18,000

Therefore, accumulated depreciation by the end of 2017 is

$30,000 + $18,000

=$48,000

$48,000

Explanation:

Duble Declining method of depreciation is a method in which the depreciation is being charged at double rate than in the straight line depreciation method method do. It uses the double amount of carrying book value and estimated useful life. The depreciation charged at a faster rate.

Depreciation = Book value of asset at the start of year x 2 / useful life

2016

Depreciation = 75,000 x 2 / 5 = $30,000

2017

Book Value = 75,000 - 30,000 = $45,000

Depreciation = 45,000 x 2 / 5 = $18,000

Accumulated Depreciation = $30,000 + $18,000 = $48,000

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